The emergence of an international arbitration culture

The Culture of International Arbitration and the Evolution of Contract Law

By Joshua Karton

International arbitration is an obscure field, even among lawyers. However, it is becoming more visible for the simple reason that the field is growing. Arbitration is now one of the most important means for the resolution of international business disputes, including — most notably from the public’s point of view — disputes between investors and the governments of countries in which they invest. Academics and policymakers have begun to describe international arbitration as a form of “global governance.”

Despite its importance, the actual decision-making of international arbitral tribunals remains opaque, especially when compared with that of courts. Normally, if you want to understand legal decision-making, you would just go and read some decisions, along with the laws on which those decisions are based. With international arbitration, you can’t do that, for two main reasons. First, most arbitrations are confidential. Even arbitrations involving public interests (like those between states and foreign investors) are largely closed to the public, although they are more transparent than they used to be. Most business-to-business international arbitrations are entirely secret; even the existence of the dispute is kept confidential. Second, there is no such thing as a law of international arbitration. Instead, arbitrations may be governed by any national or international set of laws chosen by the parties or by the tribunal. For example, many international shipping contracts are governed by English law, regardless of the nationality of the parties. Public disputes like investor-state arbitrations are governed by public international law, which is notoriously uncertain and incomplete.

With traditional tools of legal analysis rendered largely useless, the key to understanding the decision-making of international arbitrators, and thereby the kind of justice or kind of governance provided by international arbitration, is the emerging legal culture of the international arbitration community.

Lawyers tend to reject cultural explanations for legal outcomes. They are, after all, trained in the language of rules and precedents. Nevertheless, the notion of a legal culture is uncontroversial. Legal processes, like all human interactions, take place within a context of shared cultural norms and assumptions. Anyone who has had the slightest contact with a legal system knows that “the law” can never be reduced to just “the applicable legal rules.” If nothing else, the rules need interpreting, and there will always be situations for which no specific rule exists. Legal culture fills those gaps because it inculcates a collective, reflexive response that often obviates the need for argument. In many ways, the real purpose of a law school education is to instil common ways of thinking and reacting.

However, it is much harder to conceive of a shared legal culture in international arbitration, where lawyers and arbitrators don’t share a common nationality, language, religious/ethical system, or professional formation, or even access to a common body of governing laws and precedents. How can so diverse a group as international arbitration practitioners share a legal culture? Do they even constitute an identifiable community?

Despite their differences, international arbitration practitioners actually have more in common than the body of legal practitioners within any one jurisdiction. After all, the gap between the work environment, perspective, and career path of a high prestige corporation lawyer and a sole practitioner in any given city is so great as to make it hard to see any significant bonds of common experience and interest between them.

International arbitration lawyers tend to have attended a relatively small number of elite western universities (at least at the graduate level), to have developed their careers in large, corporate, usually Anglo-American firms or major universities, and to travel in both business and academic circles. They tend to share cosmopolitan, multinational backgrounds and speak multiple languages. They work repeatedly with each other and on disputes within a relatively narrow band of commercial subjects. It actually makes more sense to speak of an international arbitration community than to speak of a legal community within a country.

In my research on international arbitration, I have identified several individual norms that comprise international arbitration culture. Those norms inform a set of predictions about how arbitrators are likely to decide on commercial disputes and in turn how contract law will evolve through arbitral decision-making. In the absence of a shared set of codified rules or even published case reports, this kind of socio-legal analysis is one of the only available means for making these kinds of predictions.

In domestic legal communities, culture provides a shared frame of reference on the applicable laws and also fills the inevitable gaps in those laws. The same is true in the transnational sphere. Like so many other social fields, law has become simultaneously globalized and privatized. This transition has led to the emergence of a transnational community of international arbitration practitioners who have more in common with each other than they do with their compatriots. These kinds of stateless global communities are emerging in practically every sector of society and industry. (Think of the “Davos set.”) They are sufficiently closely-knit to develop their own informal codes and mores. For better or worse, if we want to understand how these communities are transforming our societies, we have to pay attention to their cultures.

Joshua Karton is an Assistant Professor in the Faculty of Law at Queen’s University in Kingston, Ontario, Canada, where he has taught since 2009. A graduate of Yale (BA 2001) and Columbia Law School (JD 2005), he is a member of the New York Bar. He practiced as an associate in the litigation/arbitration group at Cleary Gottlieb Steen & Hamilton LLP in New York before pursuing his doctoral studies at Cambridge, from which he graduated in 2011 with a PhD in law. He is the author of The Culture of International Arbitration and the Evolution of Contract Law.

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